Knight Frank’s latest Hong Kong quarterly market review highlights improving momentum across selected segments of the property market, led by tighter premium office leasing availability, active residential transactions and stronger visitor-driven consumption.
Grade-A Office Market
Hong Kong Island
Hong Kong’s Grade-A office market continued to strengthen in the third quarter, supported by a renewed rebound in Chinese IPOs and sustained Chinese mainland capital. One and Two IFC are nearly at full capacity. Premium Grade-A space in Central saw particularly strong momentum, with rents rising 27.7% year-on-year in September and vacancy falling from 14.5% in the beginning of this year to 6.9% as at end September.
With limited new supply over the next four years, rents are expected to remain on an upward trajectory, prompting tenants to plan 12 to 18 months ahead of lease expires.
Low vacancy in Central is also driving decentralisation. With Admiralty vacancy already low at 4%, we expect spillover demand to West Kowloon and Causeway Bay, supported by upcoming supply, and Quarry Bay, where rents remain more affordable and vacancy is higher.
Kowloon
Relocations represented approximately 90% of the ten largest office transactions by floor area during the period, compared with roughly 55% in the previous month. The average transaction size rose to around 5,400 sq ft in Q3, from about 4,000 sq ft in the first half of 2026. Occupiers used the current market window to upsize, upgrade and reposition their premises ahead of broader rental growth.
The completion of Crystal Tower in Kwun Tong added new Grade-A supply during the quarter. With anchor commitments still pending, the additional floorplates are expected to maintain pressure on vacancy in Kowloon East.
Residential Market
Sales Market
Hong Kong’s residential market continued its recovery from the April 2025 trough, with home prices rising 12% since. However, changing interest-rate expectations have encouraged a wait-and-see approach among buyers. Actual mortgage costs have yet to rise materially, while developers continue to offer attractive mortgage packages to support primary-market demand.
Quality, location and pricing remain the key differentiators. We expect the market to remain stable through year-end, with transaction volume growth continuing to lead price growth. Home prices are forecast to rise 8-10% year on year, while first-hand sales are expected to reach 20,000 units, with monthly transactions of around 1,500 units in the coming months.
Leasing Market
The residential leasing market remained robust, with demand continuing to outpace available supply. Limited stock supported rental growth, particularly in the luxury sector, while demand from expatriates, employees of multinational companies and Chinese mainland families remained active.
Family tenants continued to favour larger homes with access to established local and international schools. Many Chinese mainland tenants initially chose to rent while becoming familiar with the market before considering a future purchase. Luxury homes with monthly rents of HK$120,000 to HK$150,000 remained sought after. Leasing demand also came from local technology professionals, including individuals benefiting from improved liquidity linked to IPO activity.
Retail Market
Hong Kong’s retail market gained further momentum, supported by stronger sales and visitor demand. Total retail sales increased 8.5% year on year (YoY) to HK$266 billion in the first eight months of 2026. Sales of jewellery, watches and clocks, and valuable gifts rose 22.6% YoY.
Visitor arrivals increased 10.5% YoY to 36.7 million during the same period, with Chinese mainland visitors accounting for around 78% of the total. During the National Day Golden Week from 1 to 7 October, Hong Kong welcomed around 1.6 million visitors, including more than 1.41 million from the Chinese Mainland. Hotel occupancy reached around 90% during the holiday period.
Hotel performance remained healthy, with average occupancy reaching 87% from January to August and ADR rising 6.9% YoY to HK$1,292. Sustained visitor arrivals and robust Golden Week traffic continued to support retail consumption heading into the fourth quarter.
Improving retail and tourism fundamentals continued to drive leasing activity in core retail districts, with international and luxury retailers expanding their presence in prime locations.
Beyond core retail districts, new neighbourhood malls are also broadening Hong Kong’s retail landscape with a stronger focus on F&B, outdoor, lifestyle and experience-led concepts.
Capital Markets
Hong Kong’s commercial property investment market gained momentum in the first three quarters of 2026. While the office sector generated the largest headline value amounting to 53% across sectors, hospitality has emerged as the market’s clear growth driver.
Hotels emerged as the strongest growth segment, with transaction value reaching HK$11.3 billion, nearly double the HK$6.3 billion recorded in 2025. Private capital remains a key market driver, with family offices and UHNW investors accounting for 16% of transactions across all sectors and 24% of hotel and student accommodation deals. With 3,384 single-family offices established in Hong Kong as of end-2025 and further growth targeted by the government, private capital is expected to continue supporting investment activity. This momentum is further bolstered by the government’s initiative to establish a world-class international gold trading and vault storage hub.